Part (a, ii) asked candidates to undertake a valuation of the company with and without the new project and required candidates to recognise that an APV approach would be the best approach to take when assessing the value of the new project. On the whole, the majority of candidates did this part well.

Common errors included taking off tax and interest from the project cash flows, which is not correct. Some answers did not calculate the terminal values of the company or the project correctly. Although minor errors were made by most candidates, flexibility in awarding marks meant that these did not detract from the quality of the answers.

Part (a, iv) asked candidates to discuss their results, including any assumptions made in obtaining the results, additional reasons for listing and why new shares maybe issued at a discount. Stronger answers did this part well and especially the reasons for listing and issuing new shares at a discount were covered well.

The answers explaining the assumptions were somewhat weaker, giving general but not scenario-specific assumptions. Few answers gave the range of possible share prices (with and without the project, with and without the discount), and therefore the discussion here was limited.

A sizeable number of candidates ignored or answered this part very superficially and therefore did not gain the majority of the 12 marks.. Candidates must ensure that all parts of all questions are answered in reasonable depth and commensurate to the marks allocated for that part.